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[truth411]

Arent most of the hardcore Xbox gamers still on that GamePass $1 deal that last 3 years?
GamePass make since for small indie devs for a guaranteed revenue stream, but it makes no financial sense for AAA games. Which easily cost over $100 million to develop each, while at the same time paying every game dev on the service for each download.

 

[John Wick]

I'll never understand how people can become so invested in a company, that the mere thought of discussion (positive or negative) throws them into a rage. It wasn't earth shattering news to most.

Tell me about it

 

[Heisenberg007]

My opinion is GP is great, a game changer. More gamers will jump in. Every GP'assers are loving it.
MS is going to sustain it. It will be profitable in the future. Subs prices will of course go up.
AAA games will be on GP day 1.
Stop being so worrisome over things you have no internal data or idea or vision.
Just stop making old assumptions of doom and gloom.

And what are you basing this rosy picture on?

I just did some very basic calculations here. Feel free to post your rebuttal.

1. MS does not share data that shows profitability.
2. MS does not even share a plan -- a target # of subscribers -- that shows what numbers they need to hit to become profitable.
3. MS wants to emulate Netflix, but Netflix only earns small profits if they scale down content production. Otherwise, their growth has slowed down and their cost per subscriber has increased considerably. Their debts are also out of hand. They are also leaking cash flows. So MS's inspiration isn't doing that hot either, and they have ~200 million subscribers. MS has ~20 million subscribers.
4. No gaming subscription in the history of the gaming industry surpassed 50 million subscribers. If MS does, it will be a record.
5. But even at 80 million subscribers, Gamepass will return roughly $13 billion to MS. PlayStation operating expenditures are roughly $20 billion. This shows that $13 billion isn't going to be enough, and that's not even including the xCloud server costs -- which would be huge.
6. But Xbox also has 2x more studios and more employees than PlayStation, so their game dev costs and employee expenditures will also be more than PS. So that $20 billion would likely look like $30-$40 billion.
7. To cover the expenditure of $40 billion, Microsoft will need 220 million subscribers. Yes, there will be other revenue sources but there will also be other expenditures.

It's really not that hard to put 2 and 2 together.

Edit: Some more context:

• At $40 billion -- ignoring other revenues and other expenditures -- MS would still be breaking even, not making any profit. For comparison, Sony hit ~$3.5 billion profit last year and will easily surpass $4 billion in profits this year.
• $40 billion may seem excessive but that's the cost of scaling aggressively. And MS has already incurred these expenses with all those studios and game development. But their revenue sources haven't scaled up.
• Other revenues mean game sales, MTX, sales %.
• Other expenses mean loss on hardware sales, xCloud server costs, Gamepass deals, partnerships, second-party game development, timed exclusivity, etc.

 

[Heisenberg007]

Arent most of the hardcore Xbox gamers still on that GamePass $1 deal that last 3 years?
GamePass make since for small indie devs for a guaranteed revenue stream, but it makes no financial sense for AAA games. Which easily cost over $100 million to develop each, while at the same time paying every game dev on the service for each download

• When it comes to the sustainability discussion, everyone becomes a $15 paying monthly subscriber.
• When it comes to playing AAA games on day one, e.g., MLB The Show, everyone becomes a winner because they are only paying $1 for playing the game.

 

[Jemm]

1. But even at 80 million subscribers, Gamepass will return roughly $13 billion to MS. PlayStation operating expenditures are roughly $20 billion. This shows that $13 billion isn't going to be enough, and that's not even including the xCloud server costs -- which would be huge.
2. But Xbox also has 2x more studios and more employees than PlayStation, so their game dev costs and employee expenditures will also be more than PS. So that $20 billion would likely look like $30-$40 billion.
3. To cover the expenditure of $40 billion, Microsoft will need 220 million subscribers. Yes, there will be other revenue sources but there will also be other expenditures.

It's really not that hard to put 2 and 2 together.

This is why this is a complicated issue to discuss, since some people include all the Xbox-related expenses (like developers/studios) to GP discussions about profitability. If they are included, then it of course isn't profitable or even sustainable. That's why there are so many differing views on the matter.

If we scope to the Game Pass expenses alone: 3rd party deals, lost sales of 1st party (xCloud could be included as a cost, too), the business makes more sense.

Game Pass isn't their only source of income. They also still sell games on Xbox and PC (including Steam). They have the XBL Gold etc. These help to cover the shared expenses (game development, store, bandwidth, marketing). Game Pass is just a way to sell (limited) licenses to gamers. Microsoft hopes to increase the subscriber count, but GP won't be the only option for getting games.

 

[Heisenberg007]

This is why this is a complicated issue to discuss, since some people include all the Xbox-related expenses (like developers/studios) to GP discussions about profitability. If they are included, then it of course isn't profitable or even sustainable. That's why there are so many differing views on the matter.

If we scope to the Game Pass expenses alone: 3rd party deals, lost sales of 1st party (xCloud could be included as a cost, too), the business makes more sense.

Game Pass isn't their only source of income. They also still sell games on Xbox and PC (including Steam). They have the XBL Gold etc. These help to cover the shared expenses (game development, store, bandwidth, marketing). Game Pass is just a way to sell (limited) licenses to gamers. Microsoft hopes to increase the subscriber count, but GP won't be the only option for getting games.

While I agree -- and that's how we should do -- we do it otherwise because MS doesn't share Gamepass specific data with us, and they likely won't ever.

But my counterargument would be that Gamepass is the big thing for Xbox. They are putting all their eggs in that one basket -- especially with day-one game releases. There are game sales because there aren't many GP subscribers yet. Xbox's userbase is roughly around 50 million. If there are 50 million GP subscribers, there won't be many retail sales because >90% of that userbase will be playing those games on GP instead of buying them.

In addition, if all those game studios are developing those games for Gamepass, it seems perfectly fine -- and the only logical thing to do -- to put those some expenditures against GP revenue.

Plus, there is a strong consensus that at some stage XBL will likely be submerged into GP.

Therefore, it is not completely wrong to do calculations the way I did -- at least there are some justifications for it.

P.S. I did put notes on additional revenues and additional expenses at the end to make it as fair as possible.

 

[Bumblebeetuna]

Because I think you like games, and Gamepass will destroy gaming as a whole and the lives of the developers. Netflix destroyed the quality in films, and filmakers are getting payed shit for their movies, Spotify also pays shit to artist for their music. It will happen the same with Gamepass, devs and publishers will not invest more time and money to make better quality games. Everything will be mid-tier Gamepasss filler, like Netfflix today.

What alternate reality are people like this living in where movies and TV were amazing before subscription services came around? I mean sure we’ve had incredible television series and movies before Netflix, obviously. But just like now, most of it was mindless entertainment.

The only real difference is now there’s more of everything. Sure, there might be more shit, but there’s also more great stuff. Netflix alone puts out a ton of great content every year. And they have to, because otherwise why would anyone subscribe? Why is GamePass any different? So according to lots of people on the Internet, MS will:

dramatically raise the GP price (it will see a price hike, EVERYONE knows this, but I’m sure when it does well still get I told you so threads)

they will drop the investment in the games

they will drop the quality of the games

they will rush out episodic trash just to fill GamePass

Why on earth would anyone subscribe to this

 

[Jemm]

While I agree -- and that's how we should do -- we do it otherwise because MS doesn't share Gamepass specific data with us, and they likely won't ever.

Yes, it would be interesting, like Xbox hardware sales, but here we are

But my counterargument would be that Gamepass is the big thing for Xbox. They are putting all their eggs in that one basket -- especially with day-one game releases. There are game sales because there aren't many GP subscribers yet. Xbox's userbase is roughly around 50 million. If there are 50 million GP subscribers, there won't be many retail sales because >90% of that userbase will be playing those games on GP instead of buying them.

With 50 million subscribers they could easily cover all the 1st party games -- that are sold on PC/Steam, too.
Most of the 3rd party games aren't (and probably won't be) on the Game Pass, though and they would still need to be bought.

In addition, if all those game studios are developing those games for Gamepass, it seems perfectly fine -- and the only logical thing to do -- to put those some expenditures against GP revenue.

True, when GP profits are used to help pay for the development, they should be counted partially as an expense, too.

Plus, there is a strong consensus that at some stage XBL will likely be submerged into GP.
Therefore, it is not completely wrong to do calculations the way I did -- at least there are some justifications for it.

They weren't a problem. It's just tricky to keep everything in the same scope so that we are talking about same things

 

[DarkMage619]

What alternate reality are people like this living in where movies and TV were amazing before subscription services came around? I mean sure we’ve had incredible television series and movies before Netflix, obviously. But just like now, most of it was mindless entertainment.

The only real difference is now there’s more of everything. Sure, there might be more shit, but there’s also more great stuff. Netflix alone puts out a ton of great content every year. And they have to, because otherwise why would anyone subscribe? Why is GamePass any different? So according to lots of people on the Internet, MS will:

dramatically raise the GP price (it will see a price hike, EVERYONE knows this, but I’m sure when it does well still get I told you so threads)

they will drop the investment in the games

they will drop the quality of the games

they will rush out episodic trash just to fill GamePass

Why on earth would anyone subscribe to this

I keep asking this question no one has any answers. Game pass will turn into something horrible and increase the price dramatically! Just you wait! So when this happens obviously the service will be done because the service is based on quality content. Perhaps this is some sort of Game pass will fail out of the market mindset. Well people have been predicting that Xbox would drop out the market any day now and they have been shown to be pretty accurate so I'm certain their predictions of Game pass will come true too.

 

[longdi]

And what are you basing this rosy picture on?

I just did some very basic calculations here. Feel free to post your rebuttal.

see that's the thing.
nobody cares about your calculations. why cant you get the hint?

As long as MS, Phil have our backs with GP, we will continue to use it, and will recommend more gamers to jump in the family.
Take it as our voices of approval, our part to grow until critical mass.

It is like powering Dragonball spirit bomb.
hopefully the good guys win at the end

 

[LordBlodgett]

I cannot believe this thread is on page 8.

 

[Pedro Motta]

What alternate reality are people like this living in where movies and TV were amazing before subscription services came around? I mean sure we’ve had incredible television series and movies before Netflix, obviously. But just like now, most of it was mindless entertainment.

The only real difference is now there’s more of everything. Sure, there might be more shit, but there’s also more great stuff. Netflix alone puts out a ton of great content every year. And they have to, because otherwise why would anyone subscribe? Why is GamePass any different? So according to lots of people on the Internet, MS will:

dramatically raise the GP price (it will see a price hike, EVERYONE knows this, but I’m sure when it does well still get I told you so threads)

they will drop the investment in the games

they will drop the quality of the games

they will rush out episodic trash just to fill GamePass

Why on earth would anyone subscribe to this

Simply because games take WAY LONGER to make than films. To keep a steady pace, you need to drop quality to feed the machine, and when the return on investment isn't that great (because, well, how could it be?) you start with the monetization process, MTX, addons etc.

 

[Outrunner]

see that's the thing.
nobody cares about your calculations. why cant you get the hint?

As long as MS, Phil have our backs with GP, we will continue to use it, and will recommend more gamers to jump in the family.
Take it as our voices of approval, our part to grow until critical mass.

It is like powering Dragonball spirit bomb.
hopefully the good guys win at the end

Of course the good guys will win in the end. PlayStation never loses.

 

[DrAspirino]

Why are you guys downplaying Microsoft for a GREAT deal for us, users? I mean... do really Sony, Nintendo, and Microsoft fanboys like to pay US$70 or €80 for a single game? REALLY?

How can you people defend those multi-billion dollar companies over YOUR OWN money?

Heck, I'm using Gamepass with the US$1 deal for a couple of years now and it's been the best deal I've ever had in games!. I don't care if Microsoft loses a bit of money from GP. They already have a lot from me by using Windows and its telemetry (which is unavoidable), and by using their other online services (onedrive and outlook).

 

[Dodkrake]

Why are you guys downplaying Microsoft for a GREAT deal for us, users? I mean... do really Sony, Nintendo, and Microsoft fanboys like to pay US$70 or €80 for a single game? REALLY?

How can you people defend those multi-billion dollar companies over YOUR OWN money?

Heck, I'm using Gamepass with the US$1 deal for a couple of years now and it's been the best deal I've ever had in games!. I don't care if Microsoft loses a bit of money from GP. They already have a lot from me by using Windows and its telemetry (which is unavoidable), and by using their other online services (onedrive and outlook).

Who are you to tell where people spend their money? I like to own my games, preferably with a physical copy. Some I'll resell, some I'll keep, some I'll hold and play later.

 

[DrAspirino]

Who are you to tell where people spend their money? I like to own my games, preferably with a physical copy. Some I'll resell, some I'll keep, some I'll hold and play later.

What I'm saying is this: AS A CONSUMER, if you're presented a choice where you pay US$70 or €80 for a game that you'll only play once, OR pay just US$1 / €1 for it on the same release date, play it and be done with it...

would you still pay US$70 / €80 for that same game? knowing you'll only play it once?

I, for a fact wouldn't pay that much money (US$70/€80) for a game I'd only play once, if I'm offered the cheaper choice.

 

[Bumblebeetuna]

Simply because games take WAY LONGER to make than films. To keep a steady pace, you need to drop quality to feed the machine, and when the return on investment isn't that great (because, well, how could it be?) you start with the monetization process, MTX, addons etc.

Good thing they have 23 studios many with multiple teams, plus loads of third party deals to make the service more enticing as well.

But either way, your doomsday scenario still doesn’t mean anything. If MS first party does start to suck, they start to rush out crap loaded with DLC and MTX, why would anyone stay subscribed? You can either:

1. just be a regular consumer on Xbox like you were pre-GP

2. go to PlayStation or Nintendo or PC

In no universe would a shitty GP service take over the industry and kill good games. Subscription services that stick around do so because they’re good.

 

[longdi]

What I'm saying is this: AS A CONSUMER, if you're presented a choice where you pay US$70 or €80 for a game that you'll only play once, OR pay just US$1 / €1 for it on the same release date, play it and be done with it...

would you still pay US$70 / €80 for that same game? knowing you'll only play it once?

I, for a fact wouldn't pay that much money (US$70/€80) for a game I'd only play once, if I'm offered the cheaper choice.

but.. but have you done the calculations? the reveeenue and expenses? GP is a growing dark splotch in the history of gaming. call the wambulance

 

[yurinka]

For sure it isn't profitable and won't be for a while, specially if you include xCloud. In addition to the insane server costs they pay a ton of money to put games there to compensate the sales these publisher lose for putting it there. Add on top of that their games being included there day one so will sell way less and a ton of subscribers basically using the system for 1 dollar or using months of trials.

But I think MS takes it as an investment, they prefer to lose a gazillion dollars now to build a huge userbase with a suicide strategy for competitors who can't afford it, targeting also to kill the current revenue source of the developers: the game sales. And then if it works out for them (I think it isn't likely, but I think it's what they target), in the future they will have killed the direct competitors and many publishers and developers, so being them dominating the market will change their strategy to monetize GamePass: splicing their big games into GaaS and DLCs being only a small part of the whole game free on GamePass, rising the subscription price, to stop moneyhatting for 3rd party stuff and instead giving them shitty conditions like in Spotify or Netflix, etc.

 

[Mitsuda Maniac]

What I'm saying is this: AS A CONSUMER, if you're presented a choice where you pay US$70 or €80 for a game that you'll only play once, OR pay just US$1 / €1 for it on the same release date, play it and be done with it...

would you still pay US$70 / €80 for that same game? knowing you'll only play it once?

I, for a fact wouldn't pay that much money (US$70/€80) for a game I'd only play once, if I'm offered the cheaper choice.

Speaking for myself, I don't typically purchase games I would only play one time. There are still rental options cheaper than Gamepass if I just want to rent a game. A month or two of Gamepass isn't that expensive and offers a large amount of good games, I agree. But I already have too many good games that I don't have time to play in my Steam and PSN libraries, so why would I spend more money to rent even more games, most of which I wouldn't play even if given for free since I already have more games than time to play them?

 

[CircusOfValues]

Any relation to Clive?

 

[Papacheeks]

What I'm saying is this: AS A CONSUMER, if you're presented a choice where you pay US$70 or €80 for a game that you'll only play once, OR pay just US$1 / €1 for it on the same release date, play it and be done with it...

would you still pay US$70 / €80 for that same game? knowing you'll only play it once?

I, for a fact wouldn't pay that much money (US$70/€80) for a game I'd only play once, if I'm offered the cheaper choice.

The issue is the inconsistency of said choice when it comes to Microsoft. Until we see the long term software from MS, and what their willing to put on the service. People can be skeptical, and honestly as time goes on money spent for the big third party games will increase.

And I would rather play a high quality $70 game than a golden corral selection of games on a service that are all over the place. Specifically when you talk about PC gamepass. But even on xbox, it all depends on what you like. Playstation and Nintendo their fans know what they like and so do the people who make the games.
Microsoft specifically gamepass is grabbing what ever they can to entice people. Hence their push for EA play being added and now bigger influx of Japanese titles. Nothing wrong with that, thats what netflix did in the beginning. Issue is I think the landscape for that throwing spagetti at a wall and seeing what sticks will start to be trimmed down over certain metrics.

I guess you are right that right now enjoy the cheap games you have access too, and with the deals they are signing I can see that being worth while for a "now" scenario. Thing is at what point does MS start thinking more about what games they want on the service because engagement metrics show specific trends. So instead of signing a bunch of Japanese, smaller indie games, they start signing only big third party titles?
I guess it's different perspectives from different people who have different gaming habits. Like my time is very fickle, so when I play a game I primarily play one at a time with a social game like warzone mixed in. Right now IM all in on returnal. And even after a I beat it which I think will be next week, im probably going to keep playing it.

Issue is there are metrics out there for what gaming does to gaming habits. Less people finish games, but play a wider variety of games. ANd to me thats good and bad. So it's one of those things that we dont know what will happen to developers who dont have people complete their games. They wont get the whole story if they dont complete it, and there for wont become a fan of the next as to maybe buy the sequel or new title that said developer makes.
Like we are getting a 4th season of castelvania. But thats it. I want more, but I bet the viewer metrics show that it has run its course. Thats the issue I see with gamepass with specific titles and games. ANd to me the negatives out weight the short terms gains for developers.

 

[EverydayBeast]

Definitely must play, cloud is a classic hero, if you meet hardcore final fantasy fans you’ll see hatred for the remake, the desire to go mmo or classic, just a lot of concern for the series. I myself advise anyone looking for a challenging rpg start with ff7 PS4 remake.

 

[Papacheeks]

Definitely must play, cloud is a classic hero, if you meet hardcore final fantasy fans you’ll see hatred for the remake, the desire to go mmo or classic, just a lot of concern for the series. I myself advise anyone looking for a challenging rpg start with ff7 PS4 remake.

To me those people who hate on the remake have no clue wtf they want. I own 2 copies of the original one on PS1 the other is the oldschool physical PC copy. And I love the remake. I think they know what they are doing.

 

[DaGwaphics]

1. MS does not share data that shows profitability.
2. MS does not even share a plan -- a target # of subscribers -- that shows what numbers they need to hit to become profitable.
3. MS wants to emulate Netflix, but Netflix only earns small profits if they scale down content production. Otherwise, their growth has slowed down and their cost per subscriber has increased considerably. Their debts are also out of hand. They are also leaking cash flows. So MS's inspiration isn't doing that hot either, and they have ~200 million subscribers. MS has ~20 million subscribers.
4. No gaming subscription in the history of the gaming industry surpassed 50 million subscribers. If MS does, it will be a record.
5. But even at 80 million subscribers, Gamepass will return roughly $13 billion to MS. PlayStation operating expenditures are roughly $20 billion. This shows that $13 billion isn't going to be enough, and that's not even including the xCloud server costs -- which would be huge.
6. But Xbox also has 2x more studios and more employees than PlayStation, so their game dev costs and employee expenditures will also be more than PS. So that $20 billion would likely look like $30-$40 billion.
7. To cover the expenditure of $40 billion, Microsoft will need 220 million subscribers. Yes, there will be other revenue sources but there will also be other expenditures.

It's really not that hard to put 2 and 2 together.

Edit: Some more context:

• At $40 billion -- ignoring other revenues and other expenditures -- MS would still be breaking even, not making any profit. For comparison, Sony hit ~$3.5 billion profit last year and will easily surpass $4 billion in profits this year.
• $40 billion may seem excessive but that's the cost of scaling aggressively. And MS has already incurred these expenses with all those studios and game development. But their revenue sources haven't scaled up.
• Other revenues mean game sales, MTX, sales %.
• Other expenses mean loss on hardware sales, xCloud server costs, Gamepass deals, partnerships, second-party game development, timed exclusivity, etc.

I think you are way overestimating game development expenses. Sony spends a lot on R&D outside of game development (PSVR, etc.) along with advertising and a whole host of other things, you can't take all of their expenses and put them over on Xbox. If you look at publicly traded gaming publishers, they aren't paying nearly as much per year in development costs. Even those that are much larger than Zenimax. When Zenimax was entertaining a sale with PEP in the past, PEP said at the time that Zenimax was a profitable company, MS has said the same, thus you can look at their yearly revenue and have an idea of what their yearly expenses are.

If Sony is spending $20b a year in game development, those studios better be dropping multiple games every single year. If they don't, they are the most expensive games ever produced, we'd be talking billions of $$$ each.

 

[Heisenberg007]

see that's the thing.
nobody cares about your calculations. why cant you get the hint?

As long as MS, Phil have our backs with GP, we will continue to use it, and will recommend more gamers to jump in the family.
Take it as our voices of approval, our part to grow until critical mass.

It is like powering Dragonball spirit bomb.
hopefully the good guys win at the end

That's another way of saying Gamepass is neither profitable nor sustainable.

 

[Heisenberg007]

I think you are way overestimating game development expenses. Sony spends a lot on R&D outside of game development (PSVR, etc.) along with advertising and a whole host of other things, you can't take all of their expenses and put them over on Xbox. If you look at publicly traded gaming publishers, they aren't paying nearly as much per year in development costs. Even those that are much larger than Zenimax. When Zenimax was entertaining a sale with PEP in the past, PEP said at the time that Zenimax was a profitable company, MS has said the same, thus you can look at their yearly revenue and have an idea of what their yearly expenses are.

If Sony is spending $20b a year in game development, those studios better be dropping multiple games every single year. If they don't, they are the most expensive games ever produced, we'd be talking billions of $$$ each.

I don't think there will be a massive difference b/w the two. Game development is game development. AAA games do and should cost roughly the same amount across the board.

It is possible that Sony may invest a couple million $$ more on their flagship projects, but nothing enough to create a significant difference in development costs in the two companies.

 

[DaGwaphics]

I don't think there will be a massive difference b/w the two. Game development is game development. AAA games do and should cost roughly the same amount across the board.

It is possible that Sony may invest a couple million $$ more on their flagship projects, but nothing enough to create a significant difference in development costs in the two companies.

What I was getting at was your $20b a year development number was ridiculous, and it is.

 

[Heisenberg007]

Why are you guys downplaying Microsoft for a GREAT deal for us, users? I mean... do really Sony, Nintendo, and Microsoft fanboys like to pay US$70 or €80 for a single game? REALLY?

How can you people defend those multi-billion dollar companies over YOUR OWN money?

Heck, I'm using Gamepass with the US$1 deal for a couple of years now and it's been the best deal I've ever had in games!. I don't care if Microsoft loses a bit of money from GP. They already have a lot from me by using Windows and its telemetry (which is unavoidable), and by using their other online services (onedrive and outlook).

No one is downplaying my friend. This thread is about the profitability of Gamepass and its sustainability from a business perspective.

We are just discussing if it is indeed a sustainable model or not, and if it will become profitable for MS or not. And if it does, then how.

 

[longdi]

That's another way of saying Gamepass is neither profitable nor sustainable.

Phil Spencer: Xbox Game Pass Pricing Is ‘Completely Sustainable As It Is’

Published 6 months ago:October 29, 2020 at 4:23 pm

"Xbox Game Pass is sustainable." Ben Decker, head of gaming services marketing, Xbox. One of the biggest worries here comes from another industry entirely. Since its inception, Game Pass has been regularly likened to Netflix, and to a lesser extent music services like Spotify. 18 Feb 2021

can we move on?

 

[Coulomb_Barrier]

Arent most of the hardcore Xbox gamers still on that GamePass $1 deal that last 3 years?
GamePass make since for small indie devs for a guaranteed revenue stream, but it makes no financial sense for AAA games. Which easily cost over $100 million to develop each, while at the same time paying every game dev on the service for each download.

Yep, those $1 a month deals will come to an end, obviously that is batshit insane if we're talking profitability. When they do, there will be a big drop in subscribers.

I remember when Sky were pushing their streaming service here in the UK for £2.50 a month. I'm so tight I signed up for several months of free passes over the course of nearly 2 years using different credit cards of mine and the wife. Now they're charging £10 a month I don't want to know. The content on there is not worth it.

 

[Heisenberg007]

What I was getting at was your $20b a year development number was ridiculous, and it is.

How?

Sony literally spent ~$20 billion last year in the Playstation division. This cost would be for many things: R&D for new hardware development, game development, marketing deals, internal growth, employee expenses, etc. Microsoft will also be incurring all these expenses and more (Gamepass deals on top of marketing deals + xCloud servers etc.).

Please list all the expenses that you think are exclusive to Sony and won't concern Microsoft.

And if Xbox has 2x the staff than PlayStation, the salary expenses will be double. If Xbox is developing 30 games and PlayStation is developing 15 games, you know that the development cost will also roughly be double for Xbox.

 

[DaGwaphics]

How?

Sony literally spent ~$20 billion last year in the Playstation division. This cost would be for many things: R&D for new hardware development, game development, marketing deals, internal growth, employee expenses, etc. Microsoft will also be incurring all these expenses and more (Gamepass deals on top of marketing deals + xCloud servers etc.).

Please list all the expenses that you think are exclusive to Sony and won't concern Microsoft.

And if Xbox has 2x the staff than PlayStation, the salary expenses will be double. If Xbox is developing 30 games and PlayStation is developing 15 games, you know that the development cost will also roughly be double for Xbox.

GP wouldn't need to support all the cost of Xbox hardware. It would need to cover the development expenses of first-party games (and even that is assuming no traditional sales), the costs of the third-party content on the service, and the costs associated with running the service itself.

 

[Heisenberg007]

GP wouldn't need to support all the cost of Xbox hardware. It would need to cover the development expenses of first-party games (and even that is assuming no traditional sales), the costs of the third-party content on the service, and the costs associated with running the service itself.

Now you're changing the direction of the argument. So you agree that the $40 billion cost is not ridiculous, but the argument now is whether GP should be responsible to support all that or not?

In that case, please read my two replies to Jemm in which I answered those points in detail.

 

[DaGwaphics]

Now you're changing the direction of the argument. So you agree that the $40 billion cost is not ridiculous, but the argument now is whether GP should be responsible to support all that or not?

In that case, please read my two replies to Jemm in which I answered those points in detail.

No, I still think the $40 billion number is ridiculous.

Case in point, Activision has about 9,500 employees and has operating expenses of about $6.5 - $7b a year. If that puts anything into perspective for you.

Sega Sammy has 7k-8k employees with a much more frugal $3.5b - $4b operating expenses number.

This is all publicly available information. Zenimax and all of Sony studios are tiny in comparison to this

 

[Heisenberg007]

No, I still think the $40 billion number is ridiculous.

Case in point, Activision has about 9,500 employees and has operating expenses of about $6.5 - $7b a year. If that puts anything into perspective for you.

Sega Sammy has 7k-8k employees with a much more frugal $3.5b - $4b operating expenses number.

This is all publicly available information. Zenimax and all of Sony studios are tiny in comparison to this

None of those are console manufacturers. They aren't producing consoles; they aren't R&D hardware; they aren't making marketing deals for third-party games; they aren't managing ~30 game development teams.

How in the world did you think that was a valid comparison that you even brought it up?

I'm literally comparing two console manufacturers. One of them, half in size than the other, literally spent $20 billion last year. The other division (twice the size of the other one) won't spend $40 billion? Unless you think PlayStation was spending all that money on wine and strippers or MS won't be spending enough money and would rather compromise on quality and quantity of games.

 

[megreotsugua]

Gamepass may not need to go external for financing, but they still need to make their business case.

IMO for Gamepass to be sustainable it needs:
- a lot more subscribers paying somewhere close to the sticker price
- to retain those subscribers over time
- to increase the price
- to reduce the cost of content (quantity over quality)
- to increase the monetisation of the ”free” content i.e. DLC and MTX (hence HALO Infinite being described as a platform for the next 10 years)

Let's hope gamers reject this gaming future.

 

[DaGwaphics]

None of those are console manufacturers. They aren't producing consoles; they aren't R&D hardware; they aren't making marketing deals for third-party games; they aren't managing ~30 game development teams.

How in the world did you think that was a valid comparison that you even brought it up?

I'm literally comparing two console manufacturers. One of them, half in size than the other, literally spent $20 billion last year. The other division (twice the size of the other one) won't spend $40 billion? Unless you think PlayStation was spending all that money on wine and strippers or MS won't be spending enough money and would rather compromise on quality and quantity of games.

How you don't is the question. LOL

Let's say MS doesn't sell any games outside of GP (which isn't reality, but we'll go with it), these are the kinds of costs they need to recoup. MS would need to pay for game development expenses with GP revenue. If they bought Sega, that's $3.5b-$4b more in operating expenses they have to account for and so on. MS isn't giving away free consoles with GP, the service doesn't need to recoup that R&D money.

 

[Heisenberg007]

How you don't is the question. LOL

Let's say MS doesn't sell any games outside of GP (which isn't reality, but we'll go with it), these are the kinds of costs they need to recoup. MS would need to pay for game development expenses with GP revenue. If they bought Sega, that's $3.5b-$4b more in operating expenses they have to account for and so on. MS isn't giving away free consoles with GP, the service doesn't need to recoup that R&D money.

You clearly didn't understand my comment. I'd suggest reading my two replies to Jemm again; I have already addressed all your concerns and points in that, including that of game sales.

 

[Interfectum]

Microsoft is in user acquisition mode right now, they don't give a fuck about GP making a profit yet. They are literally giving you retail AAA games for free. This will not last. Game Pass is sustainable, sure, but now how they are doing it right now. Gamers are just benefitting from the transition phase. Eventually you'll be getting a lot more games with a lot less quality (see Netflix, which is who they are modeling their business after).

 

[DaGwaphics]

You clearly didn't understand my comment. I'd suggest reading my two replies to Jemm again; I have already addressed all your concerns and points in that, including that of game sales.

Oh, I read them don't worry. LOL

You are looking at GP as a replacement for Xbox, when in reality it is a replacement for individual games sales (again not completely true, but we'll go with it) from XGS and Bethesda. The question becomes can they generate enough revenue as a publisher to offset their operating expenses as a publisher with the GP mixed sales/subscription model and whether or not that makes MS publishing more or less successful than just selling the games at $70 each. There are also the costs of the 3rd party content as well.

 

[Bo_Hazem]

I'm guessing that the money they're paying out to get games into the service is steep or when XBOX says GP subs they're including everyone who joined up irrespective of whether they're still/recurring subs. I thought that at 23 million they'd be seeing major profits. I guess not...

Common sense.

 

[Klayzer]

Common sense.

Lol.

 

[Alan Wake]

Gosh, Microsoft will never survive this!

 

[Bo_Hazem]

And people expect sony to release games day one on ps plus

Actually PS Plus is a much safer and profitable business model with no expensive HW needed to sustain the service but regular download servers. But gaming isn't a charity.

 

[Klayzer]

I commend Microsoft for trying to forge their own way in the industry. Time will tell whether this new direction will bear fruit or not.

My personal opinion is, its an incredibly expensive and risky endeavor. In the meantime, I will take advantage of it and discuss its impact on the industry. No harm in discussing its effects on the business side.

Wish users would stop trying to stifle the conversations about its possible negative impact on our hobby.

 

[Iced Arcade]

That's the way services work, don't think anyone is surprised.



You know it's a gamepass thread when it has more threatened Sony fans in it than Xbox fans lol

 

[CuNi]

Microsoft is in user acquisition mode right now, they don't give a fuck about GP making a profit yet. They are literally giving you retail AAA games for free. This will not last. Game Pass is sustainable, sure, but now how they are doing it right now. Gamers are just benefitting from the transition phase. Eventually you'll be getting a lot more games with a lot less quality (see Netflix, which is who they are modeling their business after).

I giggled especially when you brought up Netflix. Netflix has a ton of high quality original shows that they keep producing as well as co-creating. Saying you'll get more games of lesser quality is just plain wrong.
I don't think GP will change in any major way at all. It's acquiring users rn but after it has them it needs to sustain them. Netflix was all about licensing shows/movies out and then went on to create originals. MS is doing the same through licensing 3rd party games for a limited time and putting out 1st party games on there probably indefinitely.

 

[DarkMage619]

Needs to be reframed. Core fans take interest in their hobbies sustainability and all manner of inside baseball. Casuals don’t care how the sausage is made and just consume.

Let's say it's sustainable and not profitable but I as a core fan enjoy the service. Should I stop using the service because of profit margins or should my usage be based on if I find value in it?

 

[jakinov]

I also wonder this.

I don't understand how this can be profitable... ever.

If someone could explain then that would be nice.

I just don't see how MS can pay so much money for games to be on there yet charge a small fee to gamers. Where is the investment return?

- There's room for price increases still.
- As you increase users, your operating cost don't necessarily go up the same amount. Once you get past 40 million users, you don't necessarily need to double your yearly content spend to get another 40 million subscribers. So lets say Microsoft creates 10 big budget games a year at $200M budgets (which is two big game every quarter and some games are probably cheaper than that to make because they are sequels or small in scope). Then let's say that they spend like $500M in indie deals, and $1.5B in licensing third party. Gamepass is a pretty simple app so the dev cost are in the low millions. Marketing is probably expensive, tens of millions or maybe hundreds of millions I dunno but lets pick something high like $500M. But so far we're looking at ~$4.5 Billion in costs a year. Something they can reach at 40M subscribers to profit. If you want 50,60,70,80 million subscribers you don't necessarily need to make 20 big budget games or to double spending on licensing third party games. At some point you can have enough new content being created regularly + whatever you license out that every user you add is mostly profit and that there's enough value there for people to dish out the sub price of $10/month.
- As they acquire more studios it becomes way cheaper to make content to license out content. When Microsoft licenses out a deal with EA or Ubisoft it's not only temporary but it has to be lucrative enough for EA/Ubisoft to make a profit. If a of the content is made in-house, then they aren't spending so much money so that some third party makes a profit.
- Indirect benefits (not necessarily profits from GP itself ) directly but GP can help increase install base and they can make moeny off them via advertisements, controllers, royalties, DLC, and Live subscriptions.

I can't say that doing game pass is more lucrative than selling every game individually, but Microsoft business isn't about selling first party games. It's about building a platform where they sell everybody else games and make money off each one. Game pass can help draw people to the platform and make them money while doing it.